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Closing Comments

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Closing Comments

Corn reversed fortunes today to post the highest Dec close since July 19th on bouncing off technical support and spillover short covering from wheat. Yesterday’s sell-off couldn’t find any follow through as the USDA report came in right at trade expectations and slightly lower than the September guess. With harvest progress moving past the halfway point, the market is now moving more focus to the demand structure – leaving basis to deal with local oversupply issues. EIA Ethanol report showed another decline in production as a part of the seasonal switch to new crop but was coupled with a decline in stocks to the lowest level since Nov of 2015. Because of Monday’s holiday weekly export sales reporting is delayed until tomorrow. Dec carved out a new high on the move and keeps the uptrend started the 1st of Sept intact. Upside Dec resistance continues to be 3.60 to 3.75.

 

Soybeans surprised the trade after opening the first 30 minutes of the day session extending yesterday’s losses before running out of sellers and propelling higher into the close – finishing Nov up 10 ¾. The board crush margin seems to have stabilized and looks to be trying to carve out a bottom thanks to a return of strength in meal today. The short term signal for a bottom in Dec meal is a close above yesterday’s swing high of 306.5. Today’s close was 302.3. Nov soybeans continue to lose ground to the Jan contract. Bottom confirmation would be a close above yesterday’s high of 971 ¼. Nov closed at 956 ¼ today.  

 

Wheat got to be the star of the grains today – feels like too many moons since we could say that! Global prices that continue to grind higher coupled with more active sales activity sent the huge fund short positioning covering today. Chicago Dec posted the best close since August 26th. Which, considering the market has traded in a 15 cent range since that date shows a market that has been in extreme consolidation. Today is a big red flag if you are a fund that is part of the record short position (the net short of Managed Money is more than twice the size of last year’s total SRW crop.) Follow through short covering could send the Dec Chicago contract to 4.40 in a flash, which would have spill over support for corn. Typically you like to have the quality wheats leading price action – as they have for the past couple months – but the size of the Chicago short is too big to let the others lead when short covering is in action. Look for Friday to continue today’s trend.

 

Cattle continue to suffer under the weight of lower cash trade developing $2 to $4 under last week. The slaughter this week is looking to be the largest in nearly two years. The estimate of production at five year highs has the market grasping for a sign of light. Boxed beef were higher today, with choice up $0.67 and select up $1.11

 

Hog futures found some support on yesterday’s firmer cash and wholesale prices here in the midst of National Pork Month. Cash hogs traded mostly steady today. December futures will likely encounter significant resistance at the $46 area.

Closing Market Snapshot

 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

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